Power Lunch - Power Lunch 9/3/26

Episode Date: September 3, 2026

CNBC’s Kelly Evans and Brian Sullivan take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. ���Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks for recession highs with a Dow up more than 600 points. Welcome to PowerLutch, everybody. I am Brian in Washington, D.C., alongside Kelly at CNBC, and we have a big hour on deck with two exclusive interviews. First, Equinix, a company at the center of the multi-trillion-dollar AI data center boom. They just expanded their longtime collaboration with Nvidia. Their CEO is here, Kelly. And Victoria's secret shares are sinking today, even after an earnings beat.

Still, the stock has rallied 200% in the past year. as CEO Hillary Super's turnaround gains momentum. But with sales just shy of expectations, Wall Street's asking whether the bar has risen too far. In fact, Hillary Super will join us next Friday. Let's get right to the top story of the day, though, which is, of course, about Nvidia and some of the other chip stocks that are on the move. Good thing, Christina, Parts and Evelace is here on set to break it all down for us. Christina, where do we begin? You were talking about it in the last hour, but it's still so relevant.

InVIDIA, you know, making this acquisition of hugging face just shy of $13 billion. dollars. And maybe some are wondering, first of all, what's hugging face? It's a platform where you can download open-weight models. The models are essentially free, but once you download them, then you would customize them, and it obviously would cost money to run it. And 200,000 companies use this platform, everyone from Intel, AMD, Google, smaller firms. And so this right away is an opportunity for Nvidia to gain access to all of these companies, all of the 18 million developers on this platform. InVIDIA, we know as the AI hardware guru, what everything is built on, the Kuda software that everyone uses. And now with this acquisition, Nvidia is moving up the stack and gaining access

to a much larger pool of people, even though the CEO was on earlier this morning, promising that they were going to remain neutral because I think the quote is that it's the Switzerland of AI in regards to hugging phase. So they're not going to push their products on these 200,000 companies that use Hugging Face. It's fascinating. And so we have, on the one hand, they're kind of scaling up, maybe making a move to become almost a rival to open an AI in Anthropic one day. Then you have Broadcom.

Again, seemingly well positioned as we continue to have all this demand for AI. Yet that stock is selling off after its report last night. And a lot of these AI infrastructure, the hardware names have been on a, I don't know, they've kind of moved sideways, if not lower over the past couple of months. Yeah, there's a connection, too, with the Hugging Face and Broadcom. specifically Broadcom, Hawk Tan, the CEO yesterday on the call, was taking shots at Nvidia. There was two quotes that stood out. One, he was saying the Halapeno OpenAI chip outperforms Grace Blackwell's GPU.

And then he also went on to say that if you co-develop any type of chip with Broadcom, you will outperform any GPU. I bring that up because that shows that competition is ramping up on the custom chip side. And so with the Nvidia, you know, tapping into hugging face and gaining access to those 200, thousand companies, it's a way to hedge or diversify away from their customer base right now where they're building their own chips. For Broadcom, part of the issues, there was some comments just about the guidance, but Broadcom Google was its number one customer. Google is now shifting to number three, and then they're relying on Anthropic and Open AI, two massive companies that are propping up a lot of this market in the AI sense, but two unprofitable companies. And so there's concern

about that diversity with customer mix. You can almost see the battle lines. Go ahead, Brian. Yeah, sorry, Christine, I'm down here in D.C. Listen, I'm old enough to remember when $13 billion was a lot of money, $13 billion would have been a monster deal. I understand $13 billion is not what it was, but it's still a lot of money. Who is hugging face? What do they do? Why are they worth $13 billion? Their name is hugging face. It sounds like a diaper cream. to you, perhaps, in the ones that... But Hugging Face is really extremely well-known in the AI world. They have 18 million developers that access their platform to download various models over... It was at 3 million models that are able to download. So it's a huge market that maybe you're not as familiar with because it's not publicly treated. It's like sounds like a GitHub then.

It sounds like a... We can make fun of a bunch of names. 30 years ago. and I've been involved in AI and Internet since it was created effectively. Sounds like this is like a GitHub, like a marketplace. So to your GitHub comment, so Microsoft acquired GitHub back in 2018 for $7.5 billion. They took their developers to, I think it was, I think I'd written it down, something like 18 million developers or something,

and then they grew it dramatically. So Microsoft is a perfect example with GitHub of how they were able to grow it. Perhaps it could be the same thing with Hugging Face. To your point about the cost structure, you know, $13 billion. is the largest acquisition for NVIDIA, but not the actual largest deal. The largest deal would have been GROC when we talked about the whole memory aquacier back in December, if I remember correctly.

But it just shows how much money Nvidia is deploying. Just a few weeks ago, they put over $6 billion into Pooleside, which, you know, does the developing for certain Open AI models to acquire over 109 engineers from Pooleside. So it's not exactly an acquisition, but Nvidia is definitely putting money everywhere on all facets of the AI market. And that raises the whole circularity concerns

that often come up with this name. Christina, thanks. Really appreciate it. Christina Parts a Nevelas. Let's turn to someone who owns both NVIDIA and Broadcom rivals, as we were just hearing about, and is still bullish on the long-term AI infrastructure trade in spite of some of the hiccups we've been facing.

And he thinks the market fundamentals will outweigh any headwinds from the Fed, those possible rate hikes, even that rising public backlash against data centers. Jay Peters is here with us. He's portfolio manager at New Edge Wealth. It's good to see you. Good to see you too. I still want to make a comment about how fast we just had to swap you. But I won't. So your response to the headlines of the past 24 hours is... Yeah, I think the hugging face deal for NVIDIA is certainly interesting. I think the market reaction we're seeing the last couple of days is confirming that.

And Vividia shares rising, you mean. Yeah. And they're rising even in the session today. Correct. And I think for NVIDIA, this is another example of them getting more vertically integrated, as Christina pointed out. I think it does, you know, get to Jensen's point of creating more sort of a comprehensive AI solution for their customers. Does, you know, obviously bring about some of those circular financing concerns that have been, you know, evident in this space. But at the end of the day, both Nvidia and Broadcom continue to offer really attractive fundamentals in our view. You know, the growth we're seeing and the growth they've outlined for the next couple of years continues to look very strong. And, you know, both companies trading around 19, 20 times forward PE with premium profitability. and certainly the cash flow to make deals like this happen.

Yeah, true. Brian, did you want to get in here? Well, I just again, my point, obviously, Jay, on hugging face, and obviously we all know who they are. We've been doing this a long time, is the valuations of some of these deals, the money that's being thrown around, $10 billion here, $13 billion there, $20 billion here. It feels like, and again, maybe I'm wrong, we're getting to a point where I don't to say money doesn't matter, but the volume and extent of the money is making me a little more

wary of the entire market because I'm wondering, is anybody making sure they're not overpaying? It feels like we're at that point of exuberance where you can just pay whatever you want because the market is up so much. Ease my mind. So, Brian, I think you're right to point out that these deals, while they might not seem that, you know, the sizable. relative to the market cap of NVIDIA or Broadcom. I mean, this is a big investment for NVIDIA. I think it, you know, it does bring about these concerns about leverage in the system

that I think you're correctly pointing out. I think with the free cash flow of these companies are able to generate and given their profit margins today, I think they can certainly, you know, handle acquisitions of this size. But, yes, at a certain point, I think the circular financing, the leverage is going to, you know, be something that the markets have to, you know, accept and digest. And I think you've seen in the last couple of months, too, Brian and Kelly, that, you know, the market has a bit of a hangover from the second quarter, all the momentum and the enthusiasm and software AI.

Unless you're in the software space and then, you know, you're going gangbusters. Let me ask you about this interesting stat about short interest. Not when we usually pay a lot of attention to other than more of on a single stock basis, but maybe it's kind of more important for the market. Short interest in the median stock is the highest since 2009, 3.2%. of market cap. It's even approaching kind of the 08 financial crisis 3.8. What does that tell you? I mean, like Brian said, we're kind of at or close to all-time highs here. People are pressing the bet maybe because of the seasonal time of year, maybe because a rate hike may or may not be

on the table. Does that just give us more wherewithal to go higher? Yeah. So I think it's true. There's sort of a confluence of headwinds right now for the market. I think, you know, risk appetite has certainly come off a little bit. I think a lot of investors know that we're heading into this weaker seasonal period. We have to digest the fact that the Fed uncertainty is probably going to be with us here for quite a while. And at the same time, you've seen a pretty substantial reset in positioning and sentiment towards many names. So I do think that the short interest and probably the hedging that's going on is a function of the environment that we're in. But at the same time, the underlying trajectory and the fundamental drivers that have been with us

for several years now continue to look very solid. If you think about the AI buildout, the capital, the CAPX growth that we're expected to see. We think 30% growth on hyperscalor CAPX next year is probably understating the growth that we might see given the trends in AI adoption and compute demand. And at the end of the day, Kelly, we're still incredibly short compute in this country, and I think that's really fueling the multi-year buildout.

In about two weeks time, Jay, Kelly and I will be in the studio right here in D.C. on the Fed Day. But today, in about 10 minutes, we have the CEO of Equinix. They're the U.S.'s largest builder of data centers, one of the largest is the largest in the world. What do you want to hear from both the Federal Reserve and the data center CEOs, like the one we have coming up in a few minutes, that would continue to make you feel confident and comfortable about investing in this environment?

So I think you have to accept that there will be some uncertainty as it comes to the Fed policy. But I do think a little more clarity around the approach from the Fed where it comes to, what they're thinking, is it inflation or is it employment that they're really product prioritizing? I think we've heard a little bit more about inflation being the priority. And, you know, I think you're seeing encouraging trends in terms of core PCE coming down year over year. Yes, it is still elevated relative to history. But I think any kind of clarity around what's defining their stance when it comes to, you know, inflation will be important. And then on the data center buildout, Brian, I think you want to hear that what we've heard from the hyperscalers,

that compute intensity continues to grow. AI adoption continues to look healthy. And then at the end of the day, ultimately that these companies can continue to grow and invest in building out the infrastructure needed to support the evolution of AI in the coming years. Well, we're going to have the CEO of Equinix on in a few minutes, Jay. We'll be sure to ask her if she's seeing exactly that.

Jay Peters of New Edge wealth, Jay, thank you very much. All right. Meantime, a little bad news for potential home buyers out there. The average 30-year mortgage rate, now just a sniff away from hitting 7% again. That would be a new high, Kelly, for this year, and the highest since January of 2025. So not the highest in the last five years, but close. And one of those psychological numbers, you do wonder, does it mean something to buyers? It definitely does. Even just getting back in the neighborhood of seven, it's not what realtors certainly were hoping, or buyers. Let's get over to San Francisco. go now, where Kate Rooney has some breaking news on OpenAI. Is it Astra, Kate, or is it the outage?

Kelly, drum roll. It is Astra. We just got news of the latest flagship model from OpenAI. They say it has enhanced cyber capabilities, and this is going to be rolling out in phases. The name is chat GPT, six Astra. So it is a round number. Sometimes we get these updates in decimal points. So these round numbers tend to signal more of a step change, step function change in capability. That is what pretty much the company just said on a call with reporters that it's going to be going out to a small group first, and then this is similar to what Anthropic did with Mythos. So it's going to be available to only the enterprises that are in this approved smaller group. And then they also went on to talk about this model being more aligned.

So essentially you can delegate tasks, they say, with more confidence in the model's judgment, which is important. Developers and companies have increasingly been worried about that judgment with some of the rogue AI models and reports we've seen out there. when the president of OpenAI told us that they added additional safeguards to this particular model following a very high-profile breach for this startup hugging face where AI agents from Open AI did hack into that startup during testing. Executives said that they're increasing some of the guardrails, and they did increase

guardrails to minimize the risk of severe harm around this release. It has been a very crowded week for other AI model releases. We had Google's Gemini that released its latest flash models just yesterday, as well as meta unveiling some of its own new models. So a lot of news in this model category, guys. And the only thing I'd say here is that it's just such a big deal, Kate, to keep getting these frontier announcements day after day after day. This is a lot of compute that's coming online in a very short period of time. By the way, this morning, in an anticipation of this, we had these outages across several of the leading AI models that may have to do with either

ramped up demand or, again, the kind of existence of these products now on the market. There's demand. I would also just say the velocity at which we're getting a lot of these announcements. One thing that the thing that I hear out in the valley here is that part of the reason you're seeing more and more improvements is that the technology is now being used to actually write these better versions. So they're using AI to improve AI and basically you get this flywheel effect where the models are just able to move a lot quicker and then you have the competition between companies. Even if you have a little bit of an incremental update, they need to go out and announce these things because competition for talent, there's competition for talent. competition for enterprise customers. So all of these companies want to be seen as being on the bleeding edge and having the best model. Even if it's only going out to a small group, there's more pressure to say, oh, we've got a new one. Yeah, absolutely. And the most important thing,

we got to say hugging face again. Kate Rooney. That's right. Full circle. I got three and a half of my over under for the show. So we're going to find out. Kate Rooney, thank you very much. All right. Thanks, guys. Lots more head for you here on Power Lunch. Up next. The CEO, of a retail stock that is more than tripled in the last year. Plus, America's largest data center operator Equinix on the public pushback and how the company and industry is telling its side of the story you will hear from the CEO of Equinix. Next.

I welcome back now to a rare look at how America's largest pension fund is navigating these markets. CalPERS manages over 630 billion in assets for more than 2.4 million public employees teachers and retirees in California. While the public equities make up the bulk of the portfolio, the mega fund is making a massive push into private markets as well. Joining us now is CalPERS CEO Marcy Frost. Always Love hearing for the California pension employee retirement system.

Marcy, thanks very much for joining us, $630 billion. Again, I'm old enough to remember that is a lot of money. How do you adequately navigate that amount of money where you get the safe returns, the guarantee, returns that your pensioners, they demand. Yeah, thank you. Yeah, it is a very large number, as you can imagine, and that large number does draw in a lot of attention

about the way that CalPERS invests the assets over the various markets. But we're disciplined. We're very consistent in how we look at asset allocation. You've probably seen some of the work that we've been doing under this new approach called the Total Portfolio approach, where we'll more actively and dynamically look at where that capital is being deployed. But it's a big number, but it's a number

that we really think about more longer term. We're very, very long-term investors. We don't typically make short-term changes. However, we have gone on the public market side, we have gone a little bit more into active management. I think we've gotten quite good at finding the right managers who have a really nice values connection with CalPERS and what we're trying to accomplish here,

which is protecting the benefit of 2.4 million So our active managers, they're out looking in the markets maybe on a little more shorter term basis, and either underweighting or overwaiting where they are seeing certain macro or microtrends heading. But for the most part, diversification is our friend. We get a lot of attention because of that big number, but we are long-term investors. Well, you're not just getting attention from your retirees. You get attention from active managers, who, by the way, you all just made cheer because they want to hear that they are still in vogue, they are still needed and they're probably ringing your office, your phone's going to ring off

the hook, Marcy, because they want to be given some of that money. How do you vet these managers? How do you make sure that the quality of the manager matches the quality of what you want CalPERS to represent? Yeah. We do get a number of inquiries from either managers who are looking for new business, new capital with CalPERS, or frankly, we get a lot of inquiries from our existing managers. But we have a very long track record, particularly in private markets, private equity, where we understand the performance track record of the managers that we have been in business with, frankly, for decades. So that is a part of the equation, the calculation that we use to determine if new capital goes to a particular manager. But we are equally

interested and curious about emerging managers, new managers coming into the portfolio. Interesting bit of data for you on the private equity portfolio when we look at emerging managers, the best performing part of the book has really been in the emerging manager set. And so for private equity, the strategy from prior to three years ago returned about a 3% this last fiscal year. The new strategy that was put in place with a new team, a new leader, returned to 29%. So the team has gotten very, very good at selecting managers who have either a strong performance record coming, in or we have the conviction in that particular manager that they have a view on the markets, they have a view on a particular trend that we see equally, and we want to fund those managers.

And I think the data has really proven itself on private equity, but I think it's starting to prove itself in the public markets as well as we've entered that active management space once again. About five years ago, we completely exited active management and public equity, now coming back in and entertaining those manager pitch decks again, I think it's been really good for the team, has been really good for the managers, very good for the industry coming in, looking for capital from CalPERS. All right. Marcy, we'll leave it there for now. We'd love to bring you back and talk more about it. Again, you're one of the most impactful money managers out there, Marcy Frost, raising the funded

ratio as well over 20 years time there. Yeah, yeah, 85%. We're very happy about that. Thank you so much. We all thank you. Up next an interview you will only see here. The CEO of Victoria's Secret joins us after earnings. The stock is down to day, but up more than 200% over the past year. More right after this. Welcome back, Victoria's Secret beat on earnings this morning. The stock falling, though. It's down about 14% with cooling sales growth and a narrow revenue miss catching the

street's attention still at more than 50% this year. Let's unpack it all with Victoria's Secret CEO, Hillary Super. I still don't think of you, Hillary, as the new CEO. Welcome. Hi, Kelly. Thanks for having me. It's great to be here. Next week is two years.

I'm excited at this moment to share with you another strong quarter. Net sales growth of 10% adjusted operating income up 125%. EPS increased threefold, and this was our fifth consecutive quarter of growth. And obviously, the stock doing what it's doing, there still take this. Is there anything you want to add it? Was your slight revenue, what was it that was not living up to standards? We very slightly missed the top line street estimate, but all in all, it was an incredibly strong quarter. And you know what? We could have driven top line harder, you know, with discounting, and we made a very deliberate choice to have a higher quality result.

So we feel really good. The success was broad-based. We had growth across all three business units, VS, Pink, and Beauty. and we're entering the back half with tons of a moment, excuse me, tons of momentum. And we have a lot ahead of us, as you know, with Angels Among Us and the fashion show. Yes. Yes, I saw that out. It's going to be a big event, I'm sure. What can you tell us in general? We often think of retail as a way to kind of check in. There's been a lot of different narratives about the consumer this year. Just today, I'm seeing gas prices are back up to $4.14 a gallon. Like, there's inflation. There are these pressure points. And yet we've watched a brand like yours. Is it just a turnaround? story, who is it clicking with? And where do you see the wherewithal, the shopping wherewithal

coming in the next couple of months? Sure. You know, the state of our customer is very strong. And I think that when a brand has a strong proposition, authority in the space, and a real emotional connection with the customer, she's responding. And we've seen for some time now that we are outpacing mall traffic and she is finding us and she is shopping with us. And we're really, really thrilled with that. We're seeing this across all income cohorts, which I think is really important. So we're seeing not only customer growth, but spend increasing across all of our cohorts with the bookends under $50,000 income and above $200,000 income, really outpacing the balance of the cohorts, which tells me that in a world full of choices, she's choosing us. And that's really exciting. Is there anything else you're doing with the product mix? You know, we can't talk too specific. specifically without making half the audience blush here. But what is it? You know, again, it's interesting about those data points and kind of what's going on with income, but also, is there something that you've done with the product mix or the brand people talk about kind of

it's okay to be beautiful again. People want to look sexy again if I can even say that. I mean, what else is going on that you think might be, you know, setting you guys apart? Sure. Yeah. So, you know, I think that it was never not okay. It was always good to be sexy. And I think the nuance here is that we really want our customers to be able to dictate what sexy looks and feels like for them in that moment and in that life stage. And so we are creating a world of sexy for her and we're inviting her to determine what is right for her. And that is really resonating as a message. I think building towards the equity of VS, which is sexy, glamorous, accessible luxury, and then separately building the pink brand, which is bold and irreverent, playful. she's really connecting with both of these brands.

And the two big growth categories for us were bras and pink across the board. Bras, we are gaining market share quite considerably. We're really proud of that. And we're seeing it in both brands. And on the pink side, anything that is pink branded is incredible. And we have our icons, whether it's the flare leg, whether it's the logo fleece, she just can't get enough of it. And it's our job to keep iterating it and making it exciting.

and fresh for her. Well, you know, it is such a great window into a portion of what's going on out there. And again, we always love a turnaround story. Hillary, thanks so much for making the time. Good to see you today. Good to see you. CEO of Victoria's Secret. Brian? All right, Kelly, thank you very much. Coming up with the head of one of the world's largest data center companies has to say about public pushback and a recent big event and a deal with, yep, in video. The CEO of Equinix, joining us next. All right now to an exclusive interview right here on CNBC, a company at the center of the multi-trillion dollar AI data center boom, and they just expanded their long time collaboration with NVIDIA and had a big event with the company's CEO. Adair Fox Martin of Equinix is here.

Adair, it's great to have you back on the program. You've made an inference exchange, the stock rose about 2% sort of deepening that relationship and that partnership with NVIDIA, what does it mean for Equinix's investors and shareholders on this deal? Hi, thanks for having me back. Yesterday we had our Horizon event here in San Francisco, which was our first customer show, lots of customers and partners in town, really wonderful atmosphere as we discussed the opportunities around the AI era, and we announced two significant new products, one of which was the Equinings Inference Exchange, which built.

builds on our long-term partnership with NVIDIA and builds on that reference architecture, allowing customers to access inference much more easily. Yeah, can you explain, I guess, in sort of the layman's terms, we talked about hugging face and these deals earlier at the top of the show Adair. What inference means to Equinix and how some of these open-weight models might be impacting the spending around inference? Yeah. Well, first of all, for Equinix, this is really our key focus area to provide a neutral platform where the companies of the world can come to execute against opportunities in their business process that brings in the learnings from AI. So it's essentially that neutrality, that platform that we provide to our customers.

That's a very significant focus for us and helps customers change their business outcomes. and their business value. We're one of the few companies that really focus on the enterprise segment in this way and bring that neutrality that allows companies to be able to choose one model over another based on which one is right for the job in hand. There are so many models out there now that actually choosing which one is the right one can be a really terrific value proposition for companies in terms of cost, but also in terms of the outcome that they're driving.

How would you, it's Kelly here, and how would you describe, hi, what sets Equinix apart from so many other now entrance and competitors in this space? I think there are a few things. First of all, we're almost three decades old. So we're not a new entrant to this space. We have a very long history. We have ownership of 281 data centers across the world. And that's certainly one thing that's set us apart. Secondly, it's the neutrality of our platforms. So it isn't just a place where you come to place your compute. It is a place where you come to connect with others. So today we have over half a million business-to-business connections on our platform, facilitating the value chains of entire customers. You know, you have senators like Bernie Sanders that they are.

I hate to bring politics into it, but it's relevant to your spending Bernie Sanders, putting out bills that might imprison some people for creating certain types of AI. Even Republican Treasury Secretary Scott Bessent was saying that your industry needs a better job, do a better job at selling its side of the story. It feels like sort of the criticism and some of the hits are coming from both sides.

You're speaking to both sides right now. Everybody here in D.C. is watching C&BC. What's your message to them? Well, first of all, we welcome the dialogue. It is, I think, absolutely important that communities and government ask these questions of our industry. As I mentioned earlier, we have a 30-year track record, so we are not a visitor in communities. We are a neighbor. And we know that engaging early, engaging in a transparent way is an important part of ensuring that our role in communities is understood.

Ader, Fox Martin, the CEO of Equinix. Adair, you're always welcome back on this program anytime. We appreciate you joining us. Thank you very much. All right now to Julia Borset with a CNBC news update. Brian, a whistleblower who oversaw the vetting of ICE recruits reportedly told the Department of Homeland Security's Inspector General that the agency has had a, quote, unprecedented lowering of standards amid its recent hiring search. That's according to the New York Times, which says the official.

asked for an independent outside investigation, including allegations of fast-tracking employment, before even basic checks were completed. Representative James Comer told reporters today that he expects fellow Kentucky lawmakers, Senator Mitch McConnell, will be back on Capitol Hill next week. Comer says while he hasn't spoken to him directly, McConnell's staff says that that's the goal. McConnell has been away from Congress since suffering a fall in June requiring hospitalization. He has not spoken publicly since. And Microsoft's Xbox unit says it will start imposing monthly cloud gaming time limits for subscribers

after offering unlimited access for years. Set to go into effect in November, Game Pass subscribers will be able to pay for additional time above the caps. Microsoft says it's making the move because the cost of providing cloud gaming grows as more people use it. Kelly, back over to you. All right, Julia, thank you very much. Coming up, are you betting enough on the next? non-Mega-CAP names to benefit from AI. Our next guest has a trade for you that he believes will capture some upcoming

AI-related gains from more than just the usual names. And welcome back to Power Lunch. Time now for your market navigator. AI is still driving the market themes, but should investors be looking beyond the mega-cap tech names? Our next guest says the story is evolving. Joining us not for that case is Renee Raina. He's the head of equity ETF strategy over at Invesco. Renee, let's talk a little. bit about the AI trade. It's got a little bit of a momentum stall out in certain parts of the market, but it's leading you to believe that the other parts outside of the mega cap companies

are the ones you should be playing. Yeah, Dom, happy to be here. You know, I think part of it's really about how you want to own AI in a broad portfolio. And I think the most popular way is probably S&P 500 index, cap weighted, worked well leading up to this year. We've really seen a broadening take place. And I think as the broadening takes place relative to the market cap version, what you're really concerned is about over-concentration. If we look at the market-cap version of S&P 500, 40% of the portfolios in 10 names. And so as this AI theme widens, I think you probably want broader participation. And so how can you achieve that? I think one way is take an equal-weight approach to the S&P 500. We have an easy way to access that. It's RSP. It's the equal-weight

SP 500 ETF, and it's a way we've seen investors try to strengthen their core, if you will, by broadening out the portfolio. And so it's a very simple approach. You basically take the S&P 500 the names. You equally weight them, so you get 0.2% exposure. And your top 10 holdings represent 2.5%. So you reduce that concentration risk, which is that 40% in the calculated version. If you think about the tech bubble is around 25%, so really at a testosterone.

historic levels, you reduce that to 2.5% and you allow other names within the AI theme to participate. Early on, it was about the GPUs, then it moved to networking, then to memory and data, data centers, et cetera. I think an example there would be Sandisk. So if you take an equal weight approach, you reduce your exposure from Nvidia to 8% down to 0.2. Sand disk can now participate in a more meaningful way. They just had strong Q2 earnings. They're up over 500% year to date.

And so we think taking this broadening approach, this equal weight approach, could help investors participate more into the theme. By way of flow, it's just to kind of put a perspective of how we see allocators look at an ETF like RSP. We've seen $13 billion in flows year to date. The fund is now at $100 billion. So that tells me that investors are looking to diversify that concentration risk, but still get exposure to these names that are going to participate in the AI theme. And I think the last thing I'll say is for this AI theme to continue, if we started looking into 26 and 2027, it's really going to have to be these companies that are deploying AI in an effective way. And so I can't think of a better way to try and participate that by taking an equal way approach. So not only you get better participation across the tech stack, but as these other industries start participating, you're able to capture some of that growth. All right. That's Renee Raina, the head of Equity, ETF strategy over in Vesco. Thank you very much. Talking equal weight versus those. cap waits, Brian, I'll send things back out to you in D.C.

All right, Don, thank you very much. Coming up, more from our reporting in Venezuela about the big oil deal signed yesterday. Plus, a rare and devastating look at the fallout from the largest earthquake to hit Venezuela in 25 years. We got a firsthand look, and it's tough to see. I'll show it to you next. We have some breaking news from the White House. Amon Jabbers with the details. Amen.

Kelly, that's right. Vice President J.D. Vance just wrapped up a long and wide-ranging. press briefing here at the White House. He took a lot of questions. He ducked questions as vice presidents are want to do about his own possible candidacy for the presidency in 2028. But I did get the chance to ask the vice president about this increase in bond yields that we've been seeing over the latter part of this year. Here's how we chose to answer that question. We believe that the Fed should be lowering interest rates. We feel quite confident that if you look at the inflation numbers, if you look at the CPI numbers, that it's proper and responsible for the Federal Reserve to lower interest rates.

So a clear signal there from the Vice President about what the White House expects and hopes for from the Federal Reserve. We'll see how that's received across town over at the Fed. Meanwhile, the Vice President also taking a number of questions about the war in Iran. And he said that it's not really fair to call this a war any longer. The Vice President really making add pains here to downplay the conflict, saying major combat operations are over. Although we saw a flare-up of attacks earlier this week, he said that's simply the United States responding to Iranian provocation. And because he said the U.S. is the only global power with the capacity

to respond to Iranian attacks on commercial shipping in the Strait of Hormuz, the United States government will still do that and will still respond militarily. But he said it's simply not accurate to call it a war. more. Guys, back over to you. All right, Amon Javvers at the White House, Amen, thank you very much. Meantime, folks, if you missed it yesterday, we were live in Venezuela all day for the signing of numerous deals

at the U.S. government and American and Western companies signed with the country. To recap, and maybe to clarify some of the news, there is not one deal. There are a number of independent agreements, including some not involving U.S. government at all. But speaking of the deal made between Venezuela

and the U.S. government, Energy Secretary Christopher Wright wanted to make it clear that this is not a situation where America is, quote, taking Venezuelan oil. Business drives progress. Business will drive the growth of oil and gas production in Venezuela. But the United States involvement both benefits the taxpayers of the United States with discounted oil and enormous reserves. But the United States government will not be the operator or producer of those reserves.

No, it will not. Instead, the U.S. will get an equity stake in the local operator there in Venezuela. which is run by the gentleman by the name of Alejandro Bentancourt, who you might have read about. So the actual producer, again, will be called North American Blue Energy Partners. And that company, the acronym is called Nebep. That's what you're going to hear. Now, separately, let's talk about Chevron, because Chevron is one of the main companies in Venezuela. It's been operating for more than 100 years, and they are not a part of the U.S. deal.

They are making an absolutely separate and distinct deal from the United States. but we interviewed the CEO of Chevron Mike Worth. He was down there as well, and I asked about the growth there. Listen. The crude production in Venezuela will be a long-term ad to supply globally. The issues in product markets right now are tight conditions exacerbated by the situation in the Middle East, also the Ukraine-Russia dynamic and refining capacity that is not able to get to the market right now. The near-term solutions for prices are to do everything we can to get more products,

supply to markets, which is what we're doing. Why not build a new refinery right now? Well, that'll take five to seven years. And we need to find ways to get supply to market faster than that. So shorter, Chevron, do not expect immediate relief in prices at the gas pump. Now, an important other part to our visit. At the end of the day, yesterday, after those interviews and more, we went to look at the devastation caused by the massive earthquake that hit Venezuela on June 24th.

80% of all buildings in that town were either fully destroyed. or severely damaged. The destruction is unimaginable. Thousands were killed in the quakes, and this is a small part. It was miles and miles and miles and miles of scenes like this. And some of these people, many of whom had very little before this, one of the poorest nations in the world.

They lost everything, the little they have. They're living in tents or on the streets. Now, why were we touring this? Well, we were there because the U.S. Department of Energy is working with American and Western companies, like Chevron and Italy's E&I to help pay for the rebuild. In exchange, if they pay for the rebuild, some of these companies would get valuable tax breaks from Venezuela at a later date,

but the money is needed now, and those companies, Chevron, E&I and others, have the money and might be able to help support and fund some of those relief efforts. It was hard to see. Kelly, we don't hear a lot about it in the Western media, Venezuela doesn't get a lot of attention outside of oil. It was devastating, literally. And the fact that you could go there and not just have to go straight from a plane to, you know,

assigning a ceremony to an end back to a plane, but to be able to see really what's going on on the ground. And, you know, what's at stake here with all of these? As you say, not one big deal, but a lot of different things going on. And who knows if they can ramp it up back towards what they used to produce. But directionally, I take your point, it would make a big difference. Yeah, it was. And there's a lot of information out there. is taking oil, colonialism, whatever.

I want to be clear, a lot of the oil that the United States is making a deal for, and there's going to be that NAEP that North American Blue Energy Partners, the local operator, that was oil that was already going to Russia and China. In fact, China's still there. Russia largely out,

but the idea is that Western companies, Western investment, will go into fields that were controlled. The oil was taken by Putin and by China, and that this deal, we're going to pay them a fair wage for the NABEP deal and that that will generate tax revenue, which hopefully, hopefully, Kelly, will go to the Venezuelan people. That is ultimately going to be up to the Venezuelan government and not up to the United States or Western companies.

Indeed. All right, let's get a very quick check here on the markets if we can. We are seeing a very good day for stocks, a day that is getting better. The Dow is up 600 points. The NASDAQ is up 1.5%. And we are seeing tech stocks continue to rally. Kelly, it's a shorter week. It's a holiday next week. We get it. Maybe people don't care. Today, their portfolios are higher. Well, let's close it out here with one of the biggest stories

in the sports world today. The NBA dropping the hammer on the LA Clippers. They've suspended Steve Balmer for one year after finding the Clippers and star forward Kawhi Leonard violated salary cap circumvention rules. The NBA says Balmer knowingly tried to help Leonard secure off-court income. The Clippers were hit with a $30 million fine and will forfeit five. first round draft picks. The team has rejected the findings and vowed to fight the ruling. Joining us now with sports business analyst Joe Pompliano, head of the Joe Pomp podcast. You know, this is a business show. We know Steve Volmer very well from over the years, and many are saying, look, what's 30 million to him? What do you think this is to him?

Well, I don't think the fine is really all that much. As you mentioned, Steve Balmer is one of the top five, 10 richest people in the world. He makes $300 million per quarter in dividends from Microsoft stock. So $30 million. yes, it's a lot of money, but he also spent $50 million on the investigation personally. So he's going to be out of a lot of money regardless. I think the bigger deal is the year suspension. I mean, anyone who follows sports or follows Steve Balmer's career at all knows that he loves the Clippers.

This has been a big passion project for him. He spent a lot of time building the team over the last few years. And he just built a new $2 billion arena that's brand new, which he won't be able to step foot in now for a year. So I think really the five draft picks, the money, yes, all of that's important. but I think personally to Steve Balmer, this is about as bad as it can get. How much of this kind of activity do you think is really going on, Joe? I mean, because if it was just this and they make a big example of it, which people say

that they're making a big stink about it, it will deter others. But has this been going on in a broader sense? Well, Steve Balmer certainly believes that it is. He actually sent a letter last night to Adam Silver, the commissioner of the NBA, claiming that other teams were doing it and said that if the NBA spent $50 million investigating other teams, they would find similar infractions. I don't know if that's necessarily true. What I do think is true is that other teams are facilitating relationships between endorsement

partners, right? It makes sense. If you sponsor the team or the arena, you probably want to activate with one of the team star players. That's totally okay, totally legal. You're allowed to make those introductions. But what the NBA found in their investigation was that the Clippers were doing these side deals, arranging the terms beforehand, telling the companies how much they had to pay.

And in a lot of cases, the companies were signing side deals with the Clippers themselves, these consulting agreements where the Clippers would give them the exact amount of money that Kauai Leonard was being paid for the endorsement deal in return. Now, that is obviously not legal. It's caps or convention. So I think there's a big difference between what other teams might be doing, introducing them to the endorsement pointers, and ultimately what the clippers did.

Joe, Joe, it's Brian and D.C. Listen, what you just said, Steve Balmer turning government witness. I mean, is that going to happen where he's like, hey, other teams are doing it? If he's saying that, he must know something. If he knows something, he's very dangerous to the NBA. I think that's ultimately. what this is going to come down to. The NBA had a side deal essentially settled with the

basketball players association before this. So there's no arbitration. There's nothing like that. If Steve Ballmer wants to go at this further, he has to take it to court, which obviously could get very ugly if he cares to go that route. Joe Pombliano, yeah, fair to say very quickly, is the biggest scandal since the sort of the referee betting scandal of a number of years ago? Yeah, probably, and the Timberwolves. I mean, the Timberwolves lost five picks about two decades ago with the Joe Smith situation, when they had a similar situation. come up. But I think ultimately, what's to be remembered there is that they actually got a couple draft picks back. So things can change their fluid. Seat Balmer obviously has a lot of influence.

And we'll see what happens. Joe Pavliano, real pleasure to get you on. A big story there. Joe, thank you very much. Then that's a big number. If they spent 30, do you say they spent $30 million on the investigation? 50. 50. Well, they should ask for 50 and return that. Kelly, I'll see you back next week in studio. All right. Brian, thank you so much. And thanks everybody for watching Power Lunch.